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What Do You Need to Know About a Letter Before Action for Your Commercial Dispute?

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As a business owner, you might face contractual disputes when engaging in various agreements. When you and another company or individual disagree on terms within a business contract, resolving the issue becomes essential. Instead of heading straight to court, you can opt for an alternative dispute resolution method. One method is sending a ‘letter before action,’ which notifies the other party of your intent to pursue legal action if an agreement is not reached. This article will outline key aspects of a formal letter before action for your commercial dispute.

What Do You Need to Know About a Letter Before Action?

If your business faces a contractual dispute that you cannot resolve with the other party, it is crucial to understand the significance of a letter before taking legal action. Here, we will outline some essential points about this letter.

What is a Letter Before Action? 

A letter before action acts as a middle step between trying to settle a dispute casually and proceeding to formal dispute resolution. This letter, also called a letter before the claim, enables you to notify the business or individual who breached your contract that you expect them to fix the issue. If not, you will pursue legal action. It is advisable to retain a physical copy of the letter for your records, even if you deliver it electronically.

Why Should You Send?

Sending a letter before action for a contractual dispute is not legally required, but it is highly recommended. If your dispute falls under specific areas like:

  • construction;
  • engineering; or 
  • debt

you must follow Pre-Action Protocols, which are similar to letters before action.

Moreover, a letter before action generally succeeds in resolving a commercial dispute arising from a contractual breach. It can:

  • be cost-effective compared to court action;
  • avoid taking the time that commercial litigation takes; 
  • make the other party fully aware of the contractual breach; and 
  • allow for the contractual breach to be remedied, and you both can move on.

What Should You Include?

When writing a letter before taking legal action, you need to follow the proper procedures outlined in the legal requirements, known as a Pre-Action Protocol. The Practice Direction on Pre-action Conduct and Protocols provides detailed information on this. At the beginning of your letter, it is essential to outline your business relationship and the specifics of the contract, particularly if you are addressing another business. Additionally, make sure to include a copy of the contract with your letter.

Your letter before action should also include:

  • a list of any documents you are enclosing with the letter;
  • explanation of the contractual breach and its impact on your business in terms of loss and damage. This may involve detailing any interest owed and how you calculated it;
  • proposal for alternative dispute resolution (ADR) methods;
  • clear instructions on how you expect the other party to rectify their breach, such as by delivering the goods that were not received;
  • a specified timeframe, preferably at least 14 days, within which you expect a response; and
  • notification that if the other party fails to respond, you will proceed with commercial litigation, and they may be responsible for the costs associated with court proceedings.
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Key Takeaways

If you believe another party has breached your contract and you are in a contractual dispute with them, try resolving the issue informally first. If informal resolution fails, you can consider initiating commercial court action. While not legally required, it is advisable and helpful to send a letter before taking legal action.

This letter, also known as a letter before action, acts as a transition from informal to formal action. Sending it can save you time and money on court proceedings. When drafting this letter, it is wise to follow the layout of legally required letters. For instance, include details of the receiver’s breach of contract and how you expect the breach to be remedied, along with a timeframe for response. Clearly state that you will pursue formal court action if the business or individual fails to respond.

If you need help understanding a letter before action for your commercial dispute, our experienced disputes and litigation solicitors can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. So call us today on 0808 196 8584 or visit our membership page.

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Clare Farmer

Clare Farmer

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